For as long as I can remember, I have had an interest in business. Insofar I have pursued these aspirations with a dual concentration in finance and international business. During my early years of college I discovered a parallel desire of playing poker. Both of these concentrations, poker and business are, not coincidentally, driven by the ever-powerful principle of attaining personal wealth. And with this economy, I have found that at times I can only count on one of these to attain wealth.

To defend poker as more than just gambling is a complex issue that requires more than just open-mindedness. Arguing and discussing this with people who disagree with you is hard enough, but remember, most people (parents especially) have no knowledge or understanding of poker beyond the surface. This is often the principal complication.

Throughout these years I have had many peers, family and friends alike, try telling me that as a poker player I am a gambler before and more than anything else. I have often passionately disputed this with rigorous argument and defense. Poker is not indefensible, as many would suggest and I would proclaim that actually the corollary holds more merit; poker is easily defensible with just a little consideration and thought.

This article, however, is not your typical defense of poker arguing that it’s a game of skill, a game of applied experience, a game of math and reason, or any other dominion that poker presides in before immediately categorized as gambling. There is plenty of evidence in books, articles, and even supreme-court legislation that lend that avenue of discussion plenty of credence. And anybody who reads into it one iota knows that the evidence and support is overwhelmingly in favor of poker as a game of skill, not chance. Moving on.

This article is my assertion that associates and connects poker to a very common aspect of many families’ lives and livelihood: the stock market. Relax; this doesn’t require insight or knowledge of neither poker nor Wall Street to understand these associations. Many of my assertions are very surface level, as the idea to write this article came as more of a realization of these things than a researched or experimented discovery.

My article consists of a two part series. Since there is so much material interconnecting poker and the stock market, it must be broken up into two sections. The first part will focus primarily on macro relationships: theory and strategy, and knowledge and experience.

The second part of the series will rely on more micro levels of each entity, including the discussion of luck vs. skill, variance and volatility and long and short-term approaches.

There are plenty of other comparisons one could draw, bankroll management, the element of time and effort, diversity and game selection, goal-setting, etc

#1 Knowledge and Experience

When it boils down to it, pure knowledge and experience are just as important as any other factors. You cannot invest in a company if you have no knowledge of either that company, or more specifically, how to invest; how many shares to buy, where to buy them, how to buy them, when to buy them, at what price to buy or sell, etc. Poker is no different. If you don’t know even the most basic aspects of poker, you cannot even begin to be successful; pocket aces is the best starting hand, a flush beats a straight, posting blinds, betting sizes, the button is last to act, etc.

Even beyond fundamentals and basics, knowledge is always a part of both worlds. In poker, you know that if you flop the nuts against a hyper-aggressive player, having the knowledge that a check can increase your chances of inducing a bet from your opponent is simply not a matter of anything but being in the know. Furthermore, you know that if you buy IBM stock at $45 a share, it is currently at $48 a share and news comes out that IBM is to report higher than expected quarterly earnings, it would be in your best interest to wait to sell the stock.

It may seem too simple to grasp, but these are not oversimplifications. Knowledge at the end of the day is just as simple as yes and no; if you don’t have it, you learn it. Once acquiring it, if you can’t make it work in your favor, you need to either work harder or, for lack of a better phrase, ‘fold your hand.’ For most people, knowledge is the easiest factor to understand. Learning the basics of poker is easy, but once you get into the complex elements, then it begins to separate the weak from the strong. Keeping up with it isn’t easy and unfortunately, even if you do, the application, as you’ll find in part two, is almost all of the battle.

Experience (or let’s say applied knowledge), in my view, is the most important aspect of poker, or the stock market, because it is basically the accumulation and application of all knowledge you have learned and stored for later use. As defined, experience is knowledge or practical wisdom gained from what one has observed, encountered, or undergone. Therefore, mathematically speaking, the more hands you play directly corresponds to more gained knowledge and experience in ultimately endless poker situations and scenarios.

If you ask any poker players, professionals or amateur, you will find that experience is just as important, if not more, than any god-given mathematical talent or poker skill. Just make sure that you are learning the right way, with quality experience.

#2 Theory and Strategy

There is essentially an endless amount of theory involved in both the stock market and in poker. Look no further than pioneer poker author David Sklansky’s book, The Theory of Poker for deeper insight. Theory in poker is applied in the everyday aspects that we take for granted; game selection, odds, playing style, check raising, bankroll management, table position, bluffing, etc.

The stock market is no different; theory has driven the principles of Wall Street ever since it was created in the 19th century. In studying finance, you are bound to learn about the efficient market hypothesis (EMH). It is perhaps the most universal, well-known theorem in application to the stock market. It pertains to market efficiency and is in every single finance related textbook around the world. There are numerous trading theories, which include the most popular Dow theory and others such as the chaos theory and the Elliot Wave Theory. These theories are all fundamental in the most mundane day-to-day operations of the stock market.

Further, if you have never heard the bear vs. bull comparison in the stock market, it is used to describe two major primary trends in the stock market. They represent an overall strategy or position in the market. The comparison is as follows; bears are cautious animals that don't move too quickly. Bulls are daring animals that charge straight ahead. Investors said to be "bearish" believe the stock market will go down and thus a "bearish" investor will buy stock cautiously (perhaps even sell stock).

A "bullish" investor believes the market will go up. They will “charge” ahead putting more money into the market. An investor can be bearish or bullish depending on a particular kind of stock. But generally, the entire overall market tends to trend towards one of these strategies for full year periods. The very nature of day-to-day procedures in the stock market is especially emblematic of strategy at even the most ordinary levels. It doesn’t get more strategic than asking yourself at any moment, on many occasions, when to buy certain stocks, how many shares and at what price, how long to hold them, when to sell them, etc.

However, identifying when to sell or when to buy is just the surface. You also need to know how you can buy the right stocks in the right sectors that will go up even if the stock market doesn’t. These are all representative of trading strategies and discovering and applying these means identifying or creating the ability to spot important turning points in the financial markets.

Read Part 2

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